NorthStar, Chatham JV in $959M portfolio buy

A joint venture of Chatham Lodging Trust and Cerberus Capital Management is selling a 6,848-room, 51-hotel portfolio in a transaction worth $1.3 billion. A JV of Chatham and NorthStar Realty Finance is listed as they buyer

NorthStar is acquiring Cerberus' 89.7 percent stake in the JV, while Chatham is retaining its existing 10.3 percent share. The JV is taking 47 of the 51 hotels, for a net cash price of $933.9 million and a gross price of $958.5 million.

The 47 properties are upscale extended-stay hotels and branded select-service hotels located primarily in metro markets, with the largest concentration of NOI from hotels in California. Thirty-nine are affiliated with Marriott or Hilton.

The deal is expected to close by the end of this quarter. The portfolio will continue to be managed by Island Hospitality Management, Palm Beach, Fla.

NorthStar reportedly expects to earn an initial current yield of about 18 percent on its invested equity of $213 million.

“Having spent a substantial portion of my career in and around the hotel industry, I believe that this investment, and the extended-stay and select service space generally, will provide strong risk-adjusted returns, particularly as the broader economy continues to gain momentum,” David Hamamoto, NorthStar’s chairman & CEO, said in a release.

As part of the transaction, Chatham will acquire for a net cash price of $272.6 million (gross price of $341.5 million) four Residence Inn properties in Silicon Valley totaling 751 rooms. Chatham plans to renovate and expand all four, bumping the room count to 1,023 and spending about $59 million in the process.